Joined: May 02, 2005 Posts: 3420 Location: Oh really?
Posted: Mon May 05, 2008 3:33 am Post subject: Re: Coming Oil Price Superspike
yesplease wrote:
The rest of the world has seen an increase, but not nearly as much as we have seen, thanks to the fiscal policies of our government.
right...the rest of the world has tripled in price while we have quadrupled...no super spike there. _________________ "It's not demand; It's not supply.
It's coming up with credit to buy"
Posted: Mon May 05, 2008 4:01 am Post subject: Re: Coming Oil Price Superspike
MD wrote:
yesplease wrote:
The rest of the world has seen an increase, but not nearly as much as we have seen, thanks to the fiscal policies of our government.
right...the rest of the world has tripled in price while we have quadrupled...no super spike there.
Well, lets see, the dollar has dropped from ~108 in 2002 to ~72 recently IIRC. All told, with a strong dollar like we've seen in the past, oil would only be ~$70-80/bbl and the prices of it's refined products would be a lot lower. From $20/bbl around 2000, that's a 3.5-4 fold increase with a strong dollar, and 6 fold increase with a strong dollar, so not quite a 3:4 ratio, more like 3.75:6 ratio. A difference of $40-50/bbl thanks to the current administration's fiscal policy seems pretty significant, don'tcha think?
Also, I thin a super-spike requires the price increase to be over some relatively small time frame, so the ~$15/bbl average increase we've seen yoy may preclude even the current high price of $120/bbl from being a spike. Otoh, if it jumps to ~$250/bbl in a few months, I'm pretty sure it's a large enough jump over a small enough time period to be considered a super-spike. _________________
Posted: Thu May 08, 2008 10:36 pm Post subject: Re: Coming Oil Price Superspike
The oil is pegged to the dollar. Isn't it that a super spike in the crude price would sweep lots of money into the US and keeping the economy afloat? There would be a reduction as gasoline prices would eat up a part of this national income.
Isn't it like this: most of the bush administration have their hands deeps in the oil business and gain if the oil price increases?
Posted: Fri May 09, 2008 1:12 am Post subject: Re: Coming Oil Price Superspike
alokin wrote:
The oil is pegged to the dollar. Isn't it that a super spike in the crude price would sweep lots of money into the US and keeping the economy afloat? There would be a reduction as gasoline prices would eat up a part of this national income.
Isn't it like this: most of the bush administration have their hands deeps in the oil business and gain if the oil price increases?
First of all they have to keep telling you supplies are adequate even if they are not because that would exacerbate the problem if you thought we were going to see shortages say around Memorial Day, you might go out and hoard gas bringing it on sooner.
At any rate. Why has the dollar declined? This is an important thing to consider? Because the dollar and oil are a coupled system. I am going to claim that scarcity is driving oil higher, which is driving the dollar lower since a weak dollar correlates to inflation at home. I'm not saying there are not other factors, but I do believe that all of those factors are driven in one way or another by our foolhardy implementation of very wasteful oil technologies as far back as the 40's. We burned the stuff like it was without limit.
Our addiction to it was plain from the start, we drank it, and rubbed it on our skin, and sprayed it on our fields, and eventually made everything we desired out of it. Therefore we find ourselves being out-competed by China and India and Europe, all of whom either dealt differently with their dependence on oil, or got into the market later when they had to pay more of a premium. In short being the early bird in petroleum and not being wise in how we dealt with a finite resource made us like those stupid kids in Willy Wonka and the Chocolate Factory. We can't inherit the factory because we were just too gluttonous, selfish, imprudent, and disrespectful of our parent cultures, who warned us to live quiet and peaceful lives as close to God as possible.
If the dollar had stayed strong, oil would be $70?
Is it possible that oil priced in dollars could become relatively more scarce and the currency itself not lose value against other currencies? I am going to argue that it could not because as I said above the coupling of the dollar and oil means that the US dollar faces pressures driven by that commodity as well, it is not just a one way street.
Is it like this?
Relative scarcity drives oil prices upward. Oil going to the US is now more costly at every step in it's development as a resource. This touches thousands of nodes in the US supply chain for commodities, eating away at discretionary income and profit margins all by itself. Now wage stagnation sets in because companies do not give raises when profit margins are falling. Therefore consumer confidence begins to lag which is the engine of growth for the US economy, raising fears of a recession. A recession would cause demand for dollars to go down domestically, and with no growth in oil supplies there is no demand growth that way, therefore the market is flooded with dollars that have to decrease in price just a little more, feeding back into oil prices for everyone, but felt most keenly by us because we depend on oil in a very imprudent way. We have gutted our mass transit systems and crated cities that require an automobile to get to work, shopping, recreation all of it.
The Euro-buyers do not feel it as strongly because they are already paying twice as much as we are due to very high taxes. have the greatest mass transit systems in the world except perhaps for Japan and protect their currency with high interest rates at the expense of spectacular growth. By planning to grow more slowly and wisely they are by tenths and hundreths slowly out competing America, beating us at our own game. We showed them how to get started and they are going to show us how to finish. The clever Europeans already accepted a tax that is helping them avoid the kind of foolhardy dependence on oil we have in America.
Therefore, at some point, it will be much better for the US to let loose the strangle hold we have on oil denomination and let an International Bourse emerge with a basket of currencies for denominating oil. Demand for the dollar will drop, but it will be a drop we control and the Fed can enact policies to rebalance the dollar against other regional currencies ahead of producing a currency union for North America which can then start reaping similar advantages as the Europeans now do. First of all a North American Union will be the largest single market on earth and would stand a chance of balancing the unbelievable economic clout of Europe within a decade or so. America business would get a massive growth incentive because we would absorb into American labor markets legally, tens of millions more Latin Americans willing to work at lower wages. This would increase profitability for companies while restructuring labor markets in way more true to the realities of a global marketplace. American workers would be displaced, but the resulting strength of the Amero would offset lower wages much more than simply keeping America closed and paying already overpaid laborers a small pecentage more. Globalization is a future that we cannot avoid so long as there is a global energy market. This drives it all. Peak oil will not destroy global energy markets, it will only alter the politics and treaties that seek to secure those resources for one's own country. This will drive a rapid unification of financial systems and trading blocs across the globe in the next few decades. Since energy is already being seen, not as a locally owned commodity but as a legacy of the earth for all citizens we cannot go back and suddenly nationalize oil and gas.
Some countries would probably do much better for themselves if they did this however, rather than doing nothing. New Zealand, Russia, Iran, Venezuela. All could benefit from viewing their oil reserves as first and foremost a guarantee of prosperity for their domestic markets by building full cycle infrastructure for themselves and adopting a European style growth model. After the domestic need is satisfied the country could then determine within it's hopes for it's own citizens how much of the resouce to make available on the global market.
As I said some countries would do very well for themselves this way. But I do not believe that such opportunity actually exists because of the position that the US is in. The US ceases to exist as a world power if it does not get millions of barrels of oil a day from overseas. The armies cannot fight, the planes cannot fly, the ships cannot project power around the globe without abundant supplies of cheap oil.
America has only a few options and must begin moving very soon in one of several mutually exclusive directions to deal with it's energy problem. If we miss the boat, a US powerdown is not just a possibility it is a certainty in just a few decades. We cannot run today's America on coal and natural gas. We cannot compete for any fossil fuels in a global market when our infrastructure is so keenly vulnerable to price shocks and our import habits so addictive that we expose ourselves to a possible 50% shortfall due to politically unstable areas of the world.
We have to do something, and one of those somethings is to try to become part of a bigger market, the North American Union. This will preferred by the business class and the investment class who will desire the path to change that offers the best chance to preserve the power they have. It is easier, as we learned, to offer an E85 vehicle than to retool your entire assembly lines to build electric vehicles. TPTB are only being pragmatic when they seek the most profitable path from energy crisis to global economy.
Not quite a rant, but some things that I think I see. I am humble by Paul when he said 'He who thinks he knows something, does not know anything yet as he ought.' I keep seeking. _________________ I return to you now at the turning of the tide.
Posted: Tue May 20, 2008 10:22 pm Post subject: Re: Coming Oil Price Superspike
Arjun N. Murti an analyst at Goldman Sachs, predicts Superspike link
Quote:
Arjun N. Murti remembers the pain of the oil shocks of the 1970s. But he is bracing for something far worse now: He foresees a “super spike” — a price surge that will soon drive crude oil to $200 a barrel.
Mr. Murti, who has a bit of a green streak, is not bothered much by the prospect of even higher oil prices, figuring it might finally prompt America to become more energy efficient.
An analyst at Goldman Sachs, Mr. Murti has become the talk of the oil market by issuing one sensational forecast after another. A few years ago, rivals scoffed when he predicted oil would breach $100 a barrel. Few are laughing now. Oil shattered yet another record on Tuesday, touching $129.60 on the New York Mercantile Exchange. Gas at $4 a gallon is arriving just in time for those long summer drives.
Mr. Murti, 39, argues that the world’s seemingly unquenchable thirst for oil means prices will keep rising from here and stay above $100 into 2011. Others disagree, arguing that prices could abruptly tumble if speculators in the market rush for the exits. But the grim calculus of Mr. Murti’s prediction, issued in March and reconfirmed two weeks ago, is enough to give anyone pause: in an America of $200 oil, gasoline could cost more than $6 a gallon.
Considering how prices are going up not unlikely at all... _________________ Stocking up on popcorn
Posted: Wed May 21, 2008 2:33 am Post subject: Re: Coming Oil Price Superspike
The nominal price of crude oil is largely irrelevant whether measured in US dollars or any other currency. What matters is petroleum's relative value to other commodites as well as wages and incomes, and, of course, physical shortages.
Notice the effect of the weak US dollar pales in comparison to real inflation-adjusted prices. That is actual demand outpacing readily available supply. Note that potential demand is always greater than actual demand. High prices ration demand where as available supply is limited by natural, physical and manmade shortages.
Unfortunately, I do not have an updated version of this graph to reflect commodity price gains in the past one year. However, just looking at a regression to the mean (say around long-term bond yields) that energy and commodity prices still have much further to rise most likely at the expense of property and equity prices.
I apologize for using different time scales for comparison purposes, but it is hard to get the complete data much less prepare and size those graphs.
That fact is that governments are addicted to the revenue from oil whether that is royalties paid to producing nations or taxes levied on retail pump prices. Were we to see a super-spike in crude prices governments can lessen the blow to consumers in a stroke by rolling back taxes. But they won't because they need the money.
BigTex wrote:
Quote:
The only point I would make about economics in general when discussing peak oil (and I've made this point in various ways before) is that economic analysis simply provides red flags in the form of high prices too late. I have no suggestion regarding a better system for determining prices and how to allocate resources, but this problem of providing dramatic market signals in the form of high prices 10-20 years after the market would have needed a signal in order to actually do anything about the problem is troubling.
I suspect that an economist would say that it is the job of government to correct a market failure like this by imposing the necessary taxes to provide the appropriate price signal (which is sort of what Europse has done, I suppose) if this is in fact a market failure, but I don't think the U.S. government is anywhere near that perceptive.
So we are sort of left with a good tool (economics) when we need a great one (enlightenment?). Or maybe human nature is the real problem, and so long as humans are the ones searching for a solution, one will never be found.
Basically, you are right. Human nature and politics always trumps economics in the short-term. But that is true wether you are in a command and control economy or a social-democracy with a market economy. We know that we are living beyond the planet's ability to support us in the long-term. Doubling or tripling nominal prices would not make a difference to that unsustainability, and in any case much of the world's population could not afford to pay those higher real prices in any case, so the point is mute.
One can curb fossil fuel demand through higher real prices and carbon taxes, etc., but if no one can afford them that is another story. Why don't governments just mandate vehicles that get unlimited mileage with zero emmissions? You may as well blame it on the engineers for not developing a cleaner alternative to petroleum sooner, and at a reasonable cost that everyone can afford! ; - )) _________________ The organized state is a wonderful invention whereby everyone can live at someone else's expense.
Posted: Thu May 22, 2008 12:56 am Post subject: Re: Coming Oil Price Superspike
Given the runup today, it looks like we're already inside your spike. But spike implies a price collapse, and that is not going to happen, or at least not for very long at all.
Post peak, hyperbolic growth of oilprices is now inevitable untill oil is no longer available at any price. How could anyother mathematical model apply at this point?
Most here and at TOD acknowledge that we are past light sweet crude peak. So there is less than half the amount available as there was.
Is that half going have a value less or more than the first half?
When there is only a quarter of all once-available oil left, will it have more or less value than the previous quarter?
How about the last eighth? The last sixteenth.....
At each point, what is left is worth more than what was pumped, and of course you can keep dividing in half mathematically for ever so you can keep increasing price or value forever.
That is the very nature of hyperbolic growth. We're on a one-way trip to infinity, and it's not going to be pretty.
Posted: Thu May 22, 2008 1:14 am Post subject: Re: Coming Oil Price Superspike
dohboi wrote:
At each point, what is left is worth more than what was pumped, and of course you can keep dividing in half mathematically for ever so you can keep increasing price or value forever.
That is the very nature of hyperbolic growth. We're on a one-way trip to infinity, and it's not going to be pretty.
Not exactly. Energy is energy, and there comes a point, around $200-300/bbl for most, and right now for those who are handy, where it's cheaper to utilize alternatives, since the vast majority of oil use is incredibly wasteful. _________________
Posted: Thu May 22, 2008 3:59 am Post subject: Re: Coming Oil Price Superspike
Quote:
U.S. crude oil hit an all-time high of $130.47 a barrel (EDIT: $135.04 today)
Robust demand for crude and a weak dollar have fuelled the rally from a dip below $50 at the start of 2007.
Adjusted for inflation, oil is now above the $101.70 peak hit in April 1980, according to the International Energy Agency, a year after the Iranian revolution.
DOLLAR WEAKNESS
The fall in the value of the dollar against other major currencies has helped drive buying across commodities as investors view dollar assets as relatively cheap.
It has also reduced the purchasing power of OPEC's revenues and increased the purchasing power of some non-dollar consumers.
OPEC oil ministers have noted that although prices are rising to record nominal levels, inflation and the dollar have softened the impact.
Some analysts say investors have been using oil as a hedge against the weaker dollar.
FUNDS
Since the Federal Reserve cut U.S. interest rates in mid-August last year and central banks pumped billions of dollars into financial markets to ease a credit crunch, oil and gold have risen.
Investment flows from pension and hedge funds into commodities including oil have boomed, as has speculative trading. At the same time, the credit crunch has brought some other markets, such as the U.S. asset-backed commercial paper market, to a virtual standstill.
Some of that money has found its way into energy and commodities, analysts say.
DEMAND
While previous price spikes have been triggered by supply disruptions, demand from top consumers the United States and China is a main driver of the current rally.
Global demand growth has slowed after a surge in 2004 but is still rising and higher prices have so far had a limited effect on economic growth.
Analysts say the world is coping with high nominal prices because, adjusted for exchange rates and inflation, they have been until recently lower than during previous price spikes and some economies have become less energy intensive.
OPEC SUPPLY RESTRAINT
The Organization of the Petroleum Exporting Countries, source of more than a third of the world's oil, started to reduce oil output in late 2006 to stem a fall in prices.
Fewer OPEC barrels entering the market helped propel the rally and consumer nations led by the International Energy Agency have urged OPEC to pump more oil.
At its meetings since December, OPEC has agreed to leave output unchanged, saying there is enough crude in the market. It next meets formally on September 9.
Few in the group believe there is much it can do to tame a market it says defies logic.
NIGERIA
Supply of crude from Nigeria, the world's eighth-largest oil exporter, has been cut since February 2006 because of militant attacks on the country's oil industry.
Oil companies and trading sources have detailed 559,000 bpd of shut Nigerian production due to militant attacks and sabotage.
IRAN
Oil consumers are concerned about supply disruption from Iran, the world's fourth-biggest exporter, which is locked in a dispute with the West over its nuclear program.
Western governments suspect Iran is using its civilian nuclear program as a cover to develop nuclear weapons. Iran denies this, saying it wants nuclear power to make electricity.
IRAQ
Iraq is struggling to get its oil industry back on its feet after decades of wars, sanctions and underinvestment.
Exports of Kirkuk crude from the country's north are stabilizing as the system recovers from technical problems that had mostly idled the pipeline since the U.S.-led invasion of Iraq in March 2003.
REFINERY BOTTLENECKS
Refiners in the United States, the world's top gas guzzler, struggled with unexpected outages which have drained inventories.
Posted: Thu May 22, 2008 10:02 pm Post subject: Re: Coming Oil Price Superspike
YP, yes there is incredible waste, but at this point, as any PO book you want to lay your hands on will explain in great detail, we are hooked into a oil and gas intensive lifestyle in a thousand different ways, from the food we eat, to the ubiquitous plastics all around us to the air travel we have come to take for granted. At the very least. we're in for major adjustments of our lifestyles (lifestyles that, of course, are long overdue for adjustment).
And this is at a time in America when we are indivudually and collectively fantastically overdrawn on credit.
And even at this late date we are not even considering the simple, costfree measures that would immediately save gas (and lives) like lowering speed limits.
No, the US (at least) has just become too idiotically braindead to tie its shoes much less orchestrate the massive resources necessary to deal with the oil depletion cliff we have now jumped off of.
Posted: Sun May 25, 2008 4:27 pm Post subject: Re: Coming Oil Price Superspike
dohboi wrote:
YP, yes there is incredible waste, but at this point, as any PO book you want to lay your hands on will explain in great detail, we are hooked into a oil and gas intensive lifestyle in a thousand different ways, from the food we eat, to the ubiquitous plastics all around us to the air travel we have come to take for granted. At the very least. we're in for major adjustments of our lifestyles (lifestyles that, of course, are long overdue for adjustment).
I wouldn't say hooked, so much as forced on that path. For instance, most oil consumption in agriculture is for transportation, so more expensive oil means marginally more potatoes, rice, and beans, and less meat, fresh salads, etc... Of course, that being said, for the amount we'll likely spend w/ Iraq, we could build everyone in America a small efficient electric car and enough renewable energy to power them all, as well as enough to fix Carbon for on-highway goods transportation that actually needs the energy density of liquid fuels as well as expand the passenger and freight rail network. So, on one hand, we could actually free ourselves of our oil "addiction", or we could destabilize the ME, increase oil use, drive up prices, and make bank. Which one did we do? Clearly we're very concerned about our oil "addicition".
dohboi wrote:
And this is at a time in America when we are indivudually and collectively fantastically overdrawn on credit.
Individually credit dept has increase, but government debt has more or less stayed the same adjusted for inflation, probably thanks to the administration printing money for all it's debts. Seems to be quite profitable thus far.
dohboi wrote:
And even at this late date we are not even considering the simple, costfree measures that would immediately save gas (and lives) like lowering speed limits.
That's because the point isn't to save lives or gas, the point is to make t3h mon3yz, lotsa mon3yz.
dohboi wrote:
No, the US (at least) has just become too idiotically braindead to tie its shoes much less orchestrate the massive resources necessary to deal with the oil depletion cliff we have now jumped off of.
I wouldn't go that far. We could've in the past, we could right now, we probably can for a significant time in the future. While we don't massive profit is made, but up to a point there's no point in burning down the fields to get a little more when it'll make that in the future anyway. Leveraging wealth for social control is nothing new, it just has a new name every few decades. That being said, if you don't mind buying into this fear mongering instead of investigating what statements are made in a logical matter, that's fine by me. As shown by the Miligram and Stanford Prison experiments, most people are quite subservient to authority with greed and fear being powerful motivators. Run hamster run! _________________
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For instance, most oil consumption in agriculture is for transportation, so more expensive oil means marginally more potatoes, rice, and beans, and less meat, fresh salads, etc... Of course, that being said, for the amount we'll likely spend w/ Iraq, we could build everyone in America a small efficient electric car and enough renewable energy to power them all, as well as enough to fix Carbon for on-highway goods transportation that actually needs the energy density of liquid fuels as well as expand the passenger and freight rail network. So, on one hand, we could actually free ourselves of our oil "addiction", or we could destabilize the ME, increase oil use, drive up prices, and make bank. Which one did we do? Clearly we're very concerned about our oil "addicition". 
